Cameron Edges Past Estimate - Analyst Blog

Cameron International Corp.’s (CAM) fourth quarter results were marginally better than expected, reflecting solid performance in the execution of project-related business. Earnings per share, excluding severance-related costs and charges associated with the acquisition of NATCO Group, came in at 54 cents, a penny above the Zacks Consensus Estimate.
 
Estimates Revisions Trend
 
It was the company’s fourth consecutive positive earnings surprise. Cameron has consistently performed well during this period with its average earnings surprise being 10.2%. This implies that the company has beaten the Zacks Consensus Estimate by 10.2% over the last four quarters.
 
The bullish trend was clearly visible in its estimates revisions. Though there were no estimate revisions in either direction over the last 7 days, 2 out of the 20 analysts covering the stock increased their fourth-quarter projections during the past month, with no downward revisions.
 
Year-Over-Year Earnings Down
 
However, on a year-over-year basis, Cameron’s adjusted earnings per share fell 27% (from 74 cents to 54 cents), reflecting depressed margins across several product lines. Gross profit during the period came at $436.8 million, down 8.2% year over year, as revenues fell 3.9% to $1.5 billion. Gross profit margin decreased approximately 138 basis points year over year to 29.8%.
 
DPS Segment
 
Revenues for the DPS segment totaled $946.9 million, down 1.7% from the year-ago quarter, mainly due to the timing of certain subsea project deliveries. The DPS segment EBITDA fell 16.2% year over year to $172.6 million.
 
V&M Segment
 
Quarterly revenues in the Valves & Measurement (V&M) segment totaled $312.1 million, down 17.5% year over year, while the segment EBITDA witnessed a 31.0% year over year fall to $60.9 million. This was on account of weak North American business activity levels.
 
CS Segment
 
Revenues in the Compression Systems (CS) segment totaled $205.4 million, a rise of 12.2% year over year. The segment’s EBITDA was $35.9 million, up 8.1% year over year. The positive comparison was due to rebounding E&P activities by oil companies.
 
Backlog
 
During the quarter, Cameron received orders totaling $1.4 billion, up 16.6% year-over-year, mainly due to increase in its DPS business segment (particularly deepwater projects). The composition of current order booking is: DPS – 69%, V&M – 24% and CS – 7%. At the end of 2009, total backlog stood at $5.2 billion, down 7.4% from the year-earlier level, reflecting overall market weakness and the lack of sizable project awards.
 
Capital Expenditure & Balance Sheet
 
During the quarter, Cameron spent $77.1 million on capital expenditures, with the full-year total coming at $240.9 million. As of Dec 31, 2009, cash and cash equivalents stood at $1.9 billion, while total long-term debt stood at $1.3 billion (debt-to-capitalization ratio of 24.3%).
 
Guidance
 
Management expects 2010 full-year earnings in the range of $2.10 – $2.20 per share, while that for the first quarter of 2010 is projected to be between 48 cents and 50 cents.
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